Will 2020 See a Recession? A Look at the Factors Causing Economic Uncertainty

At the risk of delving into cliché, all good things must come to an end. And so it will eventually be with the lengthy period of economic growth that has been experienced over the past decade plus. One thing is for certain, at some point recession WILL hit. Many things are less knowable, among them the timing of the recession, the magnitude of the slowdown and the effects it will have globally, as well as in Canada. Many economists believe the recession will come sooner than later, as early as 2020.[1] While there is no guarantee of this, it’s best to be prepared, so today we’ll take a look at some of the factors that could lead to recession and their likely implications. In part two of this report, we’ll focus more on ways for businesses and HR departments to prepare for recession (or even thrive within it!).

The US/China Trade Dispute

We are living in a global economy, and any discussion of Canada’s fate will logically start with that of our neighbour to the south. Those who do not make their abode beneath the surface of a large boulder are likely aware that international norms have shifted since the election of US President Donald Trump. One area where this has certainly been the case has been trade relations, particularly with China. Although the details are evolving continuously, suffice to say the two economic powerhouses are engaged in a high stakes game of chicken which has sent shockwaves through the global economy. The US has imposed tariffs on many Chinese goods, with threats of additional tariffs looming. China has reciprocated by allowing its currency to fall to an 11 year low.[2]

“Indeed, if tariffs go up to 25% for all imports from China for 4-6 months, it will heighten the risks to the cycle and the global economy could enter a recession in three quarters’ time,” says Chetan Ahya, chief economist at Morgan Stanley.[2]

Impact of US/China Trade Tensions on Canada

Canada certainly does not live in a vacuum so anything that affects our largest trading partner will impact us as well. If the US enters recession, there will, of course, be a likelihood of less demand for Canadian exports. Indeed our trade agreement with the US has been renegotiated extensively and changes in the US political or economic landscape could have unpredictable repercussions to our shared trade policy.

“Canada is a trading nation and the rules of trade are changing because the biggest economy in the world says it doesn’t like how things are going,” said Ian de Verteuil of CIBC World Markets. “It is making moves that undermine the WTO, it is demanding change. For Canada that’s not good in aggregate.”[3]

Added to this are lingering tensions between Canada and China. In December of 2018 Canada arrested Huawei CFO and Chinese citizen Meng Wanzhou, at the request of the United States, a move that angered many in Beijing.[4]Since the arrest, the Chinese government has arrested several Canadians in China and imposed damaging restrictions on the import of Canadian agriculture products. Whether or not the moves are related is a matter of some contention. Regardless, the damage to Canada’s economy is real.

Other Factors Affecting Canadian Economy

A convergence of issues could potentially compound the problem here in Canada. Canadian households are stretched with debt, worse than our American neighbours.[5]Uncertainties with the Canadian housing market could have an impact.[6] The eroding of Canada’s manufacturing sector in favor of the hub-centric tech sector is a double edged sword.[7]

The Big Picture

The truth is that nobody can say for sure what the future looks like economically. With artificial intelligence set to become more and more prominent, there is certainly going to be disruption in the job market. Fears over espionage and isolationist economic policies could reorganize the global supply chain. Just as with the rise of globalism a generation ago, we are ultimately walking into uncharted territories, the implications of which will take some time to parse.

Responsible businesses will prepare for all potential outcomes with their eyes wide open. To that end, part two of this report will focus on ways for companies, particularly human resources departments, to prepare for possible economic shifts, including recession.

Henry E. Goldbeck, President of Goldbeck Recruiting Inc, is a Certified Personnel Consultant (CPC) and founded Goldbeck Recruiting in 1997. Since then, Henry has built the company's reputation as a leading headhunter and recruitment agency in sales, marketing, operations, engineering, and executive level positions across a variety of industries.